To improve quality and cut warranty costs

Exide Industries Ltd on Tuesday announced entering into an additional technical collaborative arrangement with Shin-Kobe Electric Machinery Company Ltd, Japan.

The initiative is expected to reap dividends through enhancement of quality of automotive batteries and cut back on warranty costs.

The Rs 5,000-crore lead acid battery maker is witnessing pressure on its margins largely due to slowdown in automobile sector.

Exide had an existing technical collaboration with Shin-Kobe.

However, Exide Managing Director and CEO T.V. Ramanathan, said that the current arrangement will pave way for introduction of “different” newer technologies against payment of royalty.

It will lead to “implementing new manufacturing process” for automotive batteries, thereby ensuring higher productivity and quality, Ramanathan said. In both ways, the company should gain in terms of better cost economics.

Asked if the new arrangement would lead to roll out of fresh products, he said that such opportunities will be looked into by the research and development wing of the company.

Quality gap

Industry analysts feel that though Exide grew substantially in size over the last one-and-a-half decade, the company suffered from a technology gap.

For long, it banked on the technology collaboration with Furukawa that was inherited through acquisition of Standard Batteries.

The concern was expressed by former CEO S.B. Ganguly – who steered the company on growth path – while relinquishing office in April 2007.

“I always looked up to the Japanese manufacturers on quality issues and I aspired for Exide to cross that benchmark. However, I regret we are yet to achieve that,” he said, when asked whether he had any regrets while hanging up his boots.

Latest initiative

The first major push to mitigate the technology gap was witnessed in early 2012, when Exide roped in Pennsylvania-based East Penn Manufacturing Co Inc, makers of ‘Deka’ branded lead acid batteries as technical collaborator.

The company’s share price on Tuesday moved by less than one per cent, to close at Rs 122.40, on the NSE.

(This article was published on February 5, 2013)
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